European leaders still disagree over aspects of crisis plan
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Steve Chiotakis: European leaders are heading back to Brussels today to take another shot at solving the continent’s debt crisis.
Why we should care about what’s going on there — especially with the country at the center of the debt crisis, Greece — is what Marketplace is focusing on all week.
Marketplace’s Stephen Beard is with us live from our European desk with the latest now. Hi Stephen.
Stephen Beard: Hello, Steve.
Chiotakis: So how likely is it that we’ll see some sort of an agreement, some sort of plan today?
Beard: Some agreement is likely, and part of a plan — but hopes of a comprehensive package are waning. Remember, there are three main elements to any deal: fixing European banks so they’ve got enough capital, cutting Greece’s debt so that country can pay its own way, and boosting the firepower of this European bailout fund to prevent bigger countries like Italy getting into trouble.
Now they agree on the first element, that the banks do need more cash, but they are arguing ferociously about the other two elements of the deal — writing off Greek debt and beefing up the bailout fund.
Chiotakis: All right, so if the summit this evening, Stephen, does not produce a comprehensive package — where does that leave us?
Beard: It could be pretty nasty. Markets have been really treading water in recent days, just waiting and watching. The euro has been steady, but a vague or unsatisfactory outcome from today’s summit could change all that.
Here’s Steve Barrow, a currency strategist at Standard Bank:
Steve Barrow: What happens after we see the announcements from the eurozone could be very different, I think if they are disappointing then we could start to see the euro fall significantly.
And of course, there could be renewed waves of speculation against the government bonds of eurozone countries like Italy. Things could escalate, and was we’ve discussed so much in the past, Steve, it could spiral out of control into another global banking crisis and recession. U.S. Treasury Secretary Tim Geithner’s described Europe’s debt crisis as a posing catastrophic risk to the economy.
Chiotakis: All right, Marketplace’s Stephen Beard reporting from London. Stephen, thank you.
Beard: Okay, Steve.
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